VA Tech Wabag shares: B&K Securities sees 89% upside potential, initiates coverage with 'Buy'

B&K Securities has initiated coverage on VA Tech Wabag Ltd (VATW) with a 'Buy' recommendation, indicating an upside potential of about 89 per cent from the brokerage's assessed price of Rs 1,168. The brokerage has pegged a target price of Rs 2,208.

In its initiation note, B&K Sec highlighted the water treatment major's strong order book and long-term revenue visibility. "VA Tech Wabag carries a Rs 16,000 crore backlog (~Rs 5,500 crore O&M), offering 3.3x EPC and 8.6x O&M revenue visibility (H1 FY26). Disciplined bidding (~70 per cent hit rate) and tightening water regulations position VATW to capitalise on markets where treated-water penetration remains

"We forecast 15.7 per cent revenue CAGR (FY25-28E), driven by a margin-accretive backlog skew (overseas desal/STP + India O&M). EBITDA is expected to improve by 150 bps to 14.6 per cent, delivering 23 per cent earnings CAGR (FY25-28E)," it noted.

"Asset-light execution, overseas ramp-up and working capital gains is expected to lift post-tax RoCE from 16.9 per cent (FY25) to 20.7 per cent (FY28E)," it added.

On valuation, B&K Sec said, "At the current market price of Rs 1,168 (13.2x FY28E EPS), we initiate coverage with a Buy, valuing the stock at 25x FY28E, implying a target price of Rs 2,208."

It identified a potential re-rating opportunity, stating, "Post Wriddhi (FY22-23), RoCE has reverted to FY15 levels, when the stock traded near ~35x one-year forward P/E. The widening RoCE – P/E gap signals an incomplete re-rating – a compelling opportunity as performance sustains."

The brokerage also outlined the company's strategic shift towards stability, profitability and scale, while flagging risks such as project delays, execution slippages and muted multilateral funding.